The Pareto Principle in Poker

Posted by Barry Carter, July 8, 2014

There is a popular mathematical theory called the Pareto Principle that many successful people use to create exponential growth in their business and personal lives. Also known as the 80-20 rule, you can also see a lot of evidence of the Pareto Principle in poker, which I will explore today.

The theory is named after Italian economist Vilfredo Pareto, who observed that 80% of his country's wealth was distributed to just 20% of the population. The Principle was created by business management consultant Joseph M Juran, who suggested that this imbalance could be observed across a huge and varied number of scenarios.

The Pareto Principle states that roughly 80% of the effects comes from 20% of the causes. Or 80% of your results comes from just 20% of your effort. By implication, 80% of your efforts contribute just a very small amount to your output. The Pareto Principle is used to isolate areas of efficiency, so that they can be replicated for greater effect and to ascertain where your efforts should be concentrated.

To give you some popular examples of the Pareto Principle in action: Microsoft famously reported that fixing 20% of the most reported bugs in their software resulted in 80% of the errors and crashes being eliminated. In the US, 80% of the healthcare budget is used by 20% of the patients. Several criminology studies have found that 80% of crimes are caused by 20% of criminals.

A very interesting one I discovered in poker itself, which almost confirms to the 80-20 ratio, was that around 80% of the hands played online were played by just 15% of the players. Those players being serious online players who were playing multiple tables at once, and who played much more often than most recreational players.

Once we are aware of these imbalances, it allows us to become more efficient with how and where we concentrate our efforts. For example, many businesses discover that 80% of their sales come from just 20% of their clients. This means the best use of their resources would be spending more time looking after those clients with great customer service and/or trying to get more clients that fit a similar profile to them. Without applying the 80-20 Rule, the business would waste a lot of time on the other 80% of customers who yield much lower profits and probably cause a lot more work.

The Pareto Principle is also very popular for improving personal productivity. I 'll give you a quick example from my own life. I realized that I am most productive in the morning between about 8am and 10am, which is more or less 20% of my working day. As a result, I always make sure to do whatever my most important task of the day between those hours. Whether it is the toughest job I have that day, or the task that will prove the most beneficial, I do it during this time when I have the most focus. I can 't definitively put a figure like 80% on the value of those hours, but I can tell you I am generally very productive and I have written two books while doing full time jobs using this method.

Naturally, I have looked at how the 80-20 Rule applies to our development as poker players. However, before I go any further into poker's Pareto Principle, it is important note that you should never be completely dogmatic about this theory. First of all, the 80-20 split is just a guideline. Sometimes it is 90-10, sometimes it is 99-1, and sometimes it is 70-30. The split itself does not have to add up to 100 either, as the percentages are derived from two separate things ie. 80% of the outputs are created by 20% of the inputs. So it could easily actually be a 90/20 or a 80-10 split, for example.

Therefore, the 80-20 Rule should be used as a rough guideline. The important thing is to look for these instances where there are disproportionate results between the effort you put in, and the result you get out. Once you have identified these disproportionate results, it is the time to experiment with ways of making the most of them, by doing more of the things that yield big results, and less of the things that don't.

The Pareto Principle and Game Selection

Let's start with one I think most poker players will understand. It is one of the most fundamental rules of winning poker that in order to make a profit, you must choose to play with opponents who are not as good as you.

If you look back at all the money you have won at poker, you will not see an even distribution of winnings from all your opponents. It is highly likely that something in the region of 80% of your profits come from 20% of your opponents. In fact, it might even be even more skewed, it would not surprise me if you told me that 80% of your profits come from 5% of the people you play with.

If you use tracking software when you play online, this should be able to break down accurately how much you have won and lost against different opponents, and it will almost certainly highlight disproportionate results against certain players.

This should reinforce quite clearly the importance of game selection. If 20% of your regular opponents are providing you with 80% of your income, you should find more games where these players reside - whether that is by playing a particular game type, looking specifically for them at the tables or playing at particular times of day where they usually show up.

You could take this one step further while you are at the table, by avoiding playing marginal pots with the opponents who don 't contribute to your bottom line (Or indeed, the better players who are taking money from you). While, at the same time, playing slightly more pots than you normally would with the weaker players. Now this doesn't mean you should fold big hands vs the stronger players, or call with garbage against the softer player. However, for the marginal spots where you are not sure what to do, understanding which players contribute most to your winnings should be the deciding factor in whether you elect to play, or avoid, close decisions.

The Pareto Principle and Position

This goes hand in hand with game selection, and is a very literal example of the 80-20 Rule in Poker. At a normal six handed table, only one of the other five players (20%) will be on your immediate right, meaning you have position on them for all but one hand per orbit.

Positional advantage is as important, maybe even more so, than the cards you are dealt. You will find that over a large sample of your hand history database, the most money won for any player will be when they have the button, while the most money they lose will be from the blinds, where they are out of position. Whether as much as 80% of your profits come from that 20% of times you have the button is less certain, but it will be a big imbalance regardless.

Once again, tracking software will be able to tell you exactly how much you have won and lost from every position on the table. Over a large enough sample, you will see the biggest wins from the button, then the cut-off, and so on all the way around the table in that order. You will also most likely see losses from the blinds, regardless of how good a player you are.

So just like with game selection, we can use the 80-20 Rule to ascertain that if we win most when we are on the button, we should play way more hands from that position. Likewise, we should only play hands from out of position when we have a particularly strong holding or a very strong read on the rest of the table.

The Pareto Principle and Learning

The 80-20 Rule is often used to improve productivity, in people and business, usually to identify how time can be saved or used more effectively. However, in poker we are limited to how much we can play based on the type of games we play, and number of hours in a day. Time Management is not necessarily the most important thing while we are at the tables.

However, what we do away from the tables is very important, and the Pareto Principle can be used very effectively as it applies to learning. There is such a wealth of poker information available these days, it can be confusing and overwhelming to know what to work on. This is where the 80-20 Rule can come into effect, by helping to identify which 20% of learning methods contributes 80% of your improvement. For example, you can read books, articles, watch videos, get a coach, review hand histories, post on forums and much more. Some of these will be more effective than others, if we find out which ones work, we can make much bigger gains.

Unfortunately, you are on your own to identify what the most effective learning methods are for you, because it will differ from person to person. We all have different learning styles, what works for me might not work for you. The important thing is to start considering this subject, and to start taking notes about where you have the most 'aha' moments.

However, I do have a few suggestions of learning approaches I have observed that probably work the best for most (80% perhaps) of the poker players I have encountered.

Hand discussion

I have interviewed just about every famous poker player in the world. From Daniel Negreanu to Phil Hellmuth to Phil Galfond. You could not get a more different bunch of players, with different approaches to the game. However, the one thing I have observed in all this time is that the one commonality they all have is they talk about poker with other players…..a lot!

They are always discussing hands with each other and offering each other advice. In fact, some of them have told me that this is the only way they continue to learn the game. Once you reach a certain level, there is no more training material available, all you have left is the company you keep. I too can confirm how powerful a learning format this is; the most progress I ever made as a player was when I got a coach to talk over hands with.

I think it is the combination of it being both fun, sociable and challenging that makes it work so well. Poker can be a lonely game if you let it be, so talking poker with friends is a good way to stay motivated. Also, unlike some of the more introverted ways to learn, talking over hands with other players challenges you to look at your hands from another point of view, which is very valuable.

Biggest areas of weakness

Another way to improve your progress I learned from Mental Game Coach Jared Tendler. He has worked with hundreds of poker players to improve their learning, and one of the biggest obstacles all players face after a certain amount of time is not knowing where to concentrate their learning efforts. Whether it is knowing what to learn from the huge choice of methods, or simply not knowing what is the next logical step for their education.

Jared told me what he tells all his students; that whenever you don't know what to work on, you should work on your biggest area of weakness. Poker is a game of small edges, and as such, probably the biggest gains you can make at any one time is to eliminate an area where you lose money regularly. Every poker player will have hundreds of small areas they could improve at any one time, but it is likely that a small percentage of your weaknesses are costing you a big percentage of your overall profits at the table.

So for example, if the most costly mistake you make is going on tilt, make mastering your mindset your biggest learning priority. If you lose the most money making hero calls on the river, knuckle down to stop this from happening (perhaps by talking over these hands with friends). If you struggle with the basic maths of the game, make this the focus of your time away from the tables. If the only thing you do away from the tables is work on your biggest areas of weakness, you will make disproportionate gains at the tables.

Once you become familiar with the Pareto Principle, it can be quite eye opening just how much imbalance there is everywhere you look. The Pareto Principle in poker, and in the rest of your personal and working life, is particularly effective at helping you understand what the most important things to focus on are. However, it is important to once again reiterate that as valuable as it is, the 80-20 Rule is just a rough guideline to help you identify disproportionate results. Rather than looking for perfect examples of an 80-20 split of outcome to effort, use the Pareto Principle as a way to experiment with what works and what doesn't for you, with the goal of multiplying the stuff that does, and eliminating the stuff that doesn't.

Barry Carter is the editor of PokerStrategy.com and the co-author of The Mental Game of Poker 1 & 2. He has been working in the poker industry for almost ten years as a writer but is still primarily a poker player at heart. Barry has spent the last five years working alongside renowned mental game coach Jared Tendler, which is why is why you will often see a lot of unique perspectives from the world of psychology in his writing.